Last reviewed: 04/21/2016 1

Transcription

1 Last reviewed: 04/21/2016 1

2 PAY-TV SIGNAL PIRACY IN LATIN AMERICA AND THE CARIBBEAN Pay-TV signal piracy is a multi-billion-dollar problem in Latin America and the Caribbean. It poses daunting challenges for pay-tv operators, programmers, governments and consumers alike. In fact, the Alianza Contra la Piratería de Televisión Paga en América Latina (Alliance Against Pay-TV Piracy in Latin America), or ALIANZA, estimates that, when all forms of piracy (except the online variety) are taken into account, users of stolen and underreported pay-tv signals exceed subscribers of any legitimate pay-tv service in the region. About 29% of the approximately 86-million Latin American and Caribbean households (HHs) with pay-tv enjoy it through signal piracy, excluding its online variety. Estimates for online piracy in South America point to about 110 million individual users. This memo describes the most common types of signal piracy and highlights estimates of its cost to and negative impact on the pay-tv industry, programmers and governments. I. TYPES OF PAY-TV SIGNAL PIRACY Today, pay-tv signal piracy stands out as the No. 1 competitor of pay-tv operators and programmers in Latin America and the Caribbean. ALIANZA has identified five main types of pay-tv signal piracy that currently impact the Latin American and Caribbean market. They differ by (1) methodology; (2) driver of the illegal conduct (i.e., consumer, provider); and (3) equipment or tools required to provide or access the stolen signals. FIGURE No. 1 TYPES OF PAY-TV SIGNAL PIRACY Last reviewed: 04/21/2016 2

3 As shown in Figure No. 1, hook-up, retransmission, FTA and online piracy are all forms of signal theft, in which a consumer obtains illegal or unauthorized access to pay-tv signals or audiovisual streams. Underreporting occurs when pay-tv operators license signals properly but underreport the number of subscribers to their services and, as a result, pay lower intellectual property royalties and lower taxes and fees than otherwise due. In cases of underreporting, unlike signal theft, end users do not take actions enabling piracy and may not even be aware of the improper use of the pay-tv signals they receive. II. PENETRATION OF PAY-TV SIGNAL PIRACY By its very nature, estimating the extent of piracy and illegality is a challenging task. However, ALIANZA has developed models to do so that are considered accurate in the industry. Hook-up piracy, retransmission and underreporting: These are the most traditional forms of pay-tv signal piracy in Latin America, the Caribbean and elsewhere. To estimate the penetration of these forms of piracy, ALIANZA relies on market research conducted by Business Bureau (BB). With over 25 years experience in the industry, BB conducts telephone surveys throughout the region. Overlaying this information with demographic and other market information, it has developed estimates of the number of HHs enjoying pay-tv services. By comparing these numbers to subscriber numbers officially reported by pay-tv operators to national regulatory agencies, as well as privately reported to programmers, BB is able to derive an estimate of how many recipients of pay-tv services benefit from piracy in the form of illegal connections ( hook up ), retransmission or underreporting. For a more detailed explanation of BB s methodology and practices, see Annex No. 1. FTA piracy: BB s experience shows that users of FTA services have greater awareness of the illegality of these services, and therefore are much less likely to respond affirmatively to telephone inquiries about whether they receive pay-tv services. Therefore, BB does not provide estimates of FTA services. However, ALIANZA, through its investigation of the importation and sales of illegal FTA receivers, as well as through the intelligence gained by it in a number of important enforcement actions against servers used to illegally distribute transmission keys, has developed its own internal estimates of the penetration of FTA piracy. Based on such investigative and intelligence information, ALIANZA estimates that there are at least 4 million HHs receiving pay-tv signals through illegal FTAs. Online piracy is completely outside the scope of BB s audits and ALIANZA s estimates; it is not included in this section. For purposes of clarity, Figure No. 2, below, shows the interrelationship between and the magnitude of the two major types of pay-tv signal piracy, namely, signal theft (except online piracy) and underreporting. Last reviewed: 04/21/2016 3

4 FIGURE No. 2 TYPES OF PAY-TV SIGNAL PIRACY INTERRELATIONSHIP AND MAGNITUDE According to BB s and ALIANZA s estimates, by September 2015, the total pay-tv market in Latin America and the Caribbean 1 consisted of over 85 million HHs, and 29% of those (~24.7 million HHs) are pay-tv signal piracy users. A breakdown of these estimates is detailed in Table No. 1, below. The signal theft portion of the piracy phenomenon, estimated at ~15.8 million HHs, comprises: 1. Hook-up piracy and retransmission, both estimated by BB at ~11.8 million pirate HHs; and 2. FTA piracy, estimated by ALIANZA at ~4 million HHs. Underreporting, consisting mainly of HHs that are not reported by legal pay-tv providers as subscribers but that in fact receive the service and pay for it, is estimated by BB at ~8.9 million HHs. [Continues on page 5] 1 Includes Argentina, Bolivia, Brazil, Caribbean, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Peru, Puerto Rico, Rca. Dominicana (Dominican Republic), Uruguay and Venezuela. Paraguay is not included because of the lack of data. For purposes of this paper, Caribbean is understood to mean Aruba, Barbados, Curacao and Trinidad & Tobago. Last reviewed: 04/21/2016 4

6 III. LOSSES CAUSED BY PAY-TV SIGNAL PIRACY EXCLUDING ONLINE VARIETY TO PAY-TV INDUSTRY The Organization of American States (OAS), through its telecommunications advisory body (CITEL), recently acknowledged that subscription satellite television has been negatively affected by the widespread use of signal theft devices to the extent of putting its future development at risk. CITEL has urged its member states to set forth provisions to prevent importation, marketing and use of such signal theft devices. 2 Table No. 2, below, shows BB s estimates of pay-tv providers total annual losses caused by signal theft, excluding online piracy. According to those estimates, pirate providers operate an illegal market of approximately $4.8 billion an industry that does not create formal employment, does not pay taxes, fees, or royalties, does not provide quality services and does not reinvest in innovation and better content. [Continues on page 7] 2 Available at: Last reviewed: 01/26/2016 6

11 IV. ONLINE PIRACY ALIANZA requested NetNames Piracy Analysis 4 to conduct an investigation of the online piracy landscape and its main threats for the pay-tv industry, with a focus on television piracy activity in South America. 5 NetNames has previously authored reports, such as Sizing the Piracy Universe, that have explored the number of internet users across a range of online ecosystems. The report prepared for ALIANZA, which is believed to be the first comprehensive review of the South American online piracy landscape, provides further insight into the scale and nature of this type of piracy in the region. It analyzes Internet usage data in the countries under study, with a focus on the three principal audiovisual piracy ecosystems, namely cyberlockers, peer-to-peer networks such as BitTorrent and Ares, and illegal IPTV streaming. The report estimates the number of users 6 accessing illegal content during a single month through each of these channels. For a more detailed description of the varieties of online piracy, see Annex No. 2. Below is a summary of the key findings of the NetNames report prepared for ALIANZA. [Continues on page 12] 4 NetNames has provided piracy analysis and consulting services to content holders for more than a decade and is regularly requested by rights holders in the film, television, gaming, software and music industries to provide strategic research and advice on piracy issues. 5 The study covered Argentina, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay and Venezuela. 6 It is important to note that accessing users should not be understood as unique subscribers since users of illegal online content may also be users of legitimate or illegitimate pay-tv services. Last reviewed: 04/21/

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13 ANNEX No. 1 BUSINESS BUREAU METHODOLOGY Business Bureau (BB) possesses a database of over 25,000 pay-tv operations (legal and illegal) in Latin America and the Caribbean. BB s team and datacenter, the later staffed by 50 interviewers, contact households by telephone in almost 10,000 localities 7 in the region to conduct individual and specialized surveys on a periodic (i.e., quarterly) basis. Surveys use CATI and IVR methodologies. CATI expands to computer-assisted telephone interviewing, which is self-explanatory; IVR, which expands to interactive voice response, uses an automatic prerecorded voice system and enables the surveyed person to keypad responses. Samples, selected to represent the different socioeconomic composition of each surveyed country, have a 95.5% confidence interval and a sample margin of error of less than 5%. Phone surveys are designed to collect data about the following variables: 1) Presence of a pay-tv service at home 2) Technology used by the pay-tv service provider (i.e., cable, satellite) 3) Name of the pay-tv service provider Data collected by interviews is processed to assess how many households receive pay-tv signals in each locality. The number captures legal pay-tv subscribers, as well as illegal users who most probably believe their pirate service is legal or provided by a legal pay-tv operator. This outcome is used to identify in each locality and country: 1) underreported subscribers, and 2) signal theft users (FTA and online varieties excluded). Underreported subscribers are identified by comparing the number of subscribers per pay-tv provider found through BB s surveys with the public number reported to government authorities and the number privately reported to programmers. The latter number is obtained by BB directly from programmers through individual agreements. Finally, according to BB s methodology, pay-tv users who cannot be explained as underreported subscribers are deemed hook-up piracy or retransmission users. 7 Geographical subdivisions with more than 1,000 households. Last reviewed: 04/21/

14 ANNEX No. 2 ONLINE PIRACY ALIANZA has focused its online piracy research on these three ecosystems: 1.1. Peer-to-Peer: Peer-to-peer file sharing is the distribution and sharing of unauthorized content via peer-topeer (P2P) connections. P2P file sharing allows users to access and share content through P2P software that searches and identifies other connected users on a P2P network. In such a network, each computer acts as a server for other computers, allowing shared access to files without the need for a central server. Examples include BitTorrent, Ares, Pirate Bay and Cuevana. The typical P2P download generally proceeds along the following lines: a user interested in an infringing copy of, say, Game of Thrones, visits, for example, a BitTorrent portal site such as Pirate Bay. The user searches for the film title, and then chooses and clicks a link to download a version of the film. This link launches the user s BitTorrent client, which then enters the swarm, or network, of BitTorrent users actively sharing that film and begins downloading it. As soon as the user s client has downloaded any part of the film, it can then share that part with others in the same swarm Cyberlockers: Cyberlockers are file hosting services that are primarily used to store and distribute infringing content. They may deliver streamed content or allow direct download. While cyberlocker sites have traditionally been delineated based on this distinction, the line between streaming cyberlockers and direct download cyberlockers is becoming increasingly blurred, with many traditional streaming video hosts allowing download of content and vice versa. From a user s point of view, the experience of using either class of site is broadly analogous. Examples include Uptobox and Uploaded.net. Cyberlockers do not typically feature the capability to live stream content such as sporting events. This kind of activity, classified as live IPTV, is analyzed as a separate ecosystem by virtue of the distinct network of link sites and stream providers used to enable that activity Illegal Live IPTV Streaming: These are sites and services enabling unlicensed sharing of films and TV content. Live TV content, such as sporting events, including football matches, and premium content channels, such as HBO or similar, are also subject to infringement. Rather than recording the content and making it available for download or streaming at a later time or date, live IPTV streaming sites take advantage of specific capturing and streaming technologies that allow immediate restreaming of captured content. Last reviewed: 04/21/

15 The sites operate worldwide but, due to differences in local tastes, languages, and interests, most sites tend to focus on channels from a particular region. At the sites popular in South America, these are primarily premium Spanish- or Brazilian Portuguese-language movies, sports and entertainment channels that are traditionally broadcast via satellite or cable and protected by hardware-based measures. One example for South America is Roja Directa. The streams themselves may originate from these broadcast television sources or legitimate online simulcasts of certain channels. These are typically captured by lossy techniques that take advantage of the analog hole, such as screen capture, or by lossless techniques, such as those utilizing an HDMI capture device. The captured content is then rebroadcast around the web. Last reviewed: 04/21/

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